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Sunday, June 22, 2008

Life Insurance Cover- Some Specific Terms Defined

Life insurance cover is sought and possessed by many people as it is a rather straightforward type of insurance. The life insurance cover mechanism is simple. The beneficiaries of the life insurance cover policyholder may obtain benefits upon the death of the insured. However, the death of the insured must occur during the term of the life insurance cover or as defined by the policy itself.Before buying life insurance cover, there are certain terms which can be vital to know and to remember. Not knowing these terms can restrict you from having the most suitable life insurance cover. Let’s have a look.Cash or Surrender Value is used in life insurance cover to enable the insured to obtain a loan or even retrieve money from his account during an urgent situation. When this option is invoked, the life insurance cover will reduce its benefits and the policy will be more likely to be dropped. So, in case you are in a bad financial situation, think well before you choose this option. But it can be good to include this option with your life insurance cover just in case you have no other alternatives and really need money.The policyholder is the person who owns the life insurance cover and whose name is written on the policy. Also, it is the same person who accounts for paying the life insurance cover premiums every month or year as arranged with the insurance company. It can be vital to think carefully before agreeing to pay your life insurance cover premiums on a yearly basis. In case you encounter a financial imbalance, you may find it hard to account for the total payment and may eventually lose your life insurance cover.A unit link life insurance cover is a type of policy that offers life insurance protection as well as returns on the premiums already paid. The premiums may be invested in debt or equity and the insured has the right to decide the investment of his choice. This type of life insurance cover can be considered as one of the most expensive ones in the market. So, unless you have the money, choosing the whole life insurance cover for example, can be a good choice.A policy loan is a loan that can be awarded by the insurer to the insured from its own funds. However, this loan is obtained as the insurer uses the policyholder’s life insurance cover value as a security for the loan. This means that in case the insured is unable to repay the loan, the insurer will account for it by canceling out the life insurance cover. Therefore, do not invoke this option unless you are finding it hard to get a loan from the bank.Finally, a ‘with profits’ life insurance cover is a type of cover where the insurance company awards the insured a percentage of its profits as bonus. The bonuses can be obtained on a yearly basis or when the life insurance cover expires.

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